IDENTIFYING YOUR FINANCIAL PERSONALITY – WHO ARE YOU REALLY?

You married a smart, funny and dashing
extrovert, or perhaps a beautiful, intelligent
introvert. If asked why you married that
particular person, your answer may be
along the lines of you were attracted to
their personality. What is personality and
what does money have to do with it?
Wikipedia describes personality as having to
do with individual differences among people
in behavior patterns, cognition and emotion.
A personality trait refers to enduring
personal characteristics that are revealed in
particular patterns of behavior in a variety of
situations . If you don’t know your individual
personality type, we recommend taking the
Myers-Briggs test here or here .
Thus, before you dive headfirst into
investing, it’s important to know and
understand your financial personality.
Knowing this will help you make smarter
decisions on how and what to invest your
hard-earned cash on. Why is it important to
know your personality type? We all handle
money differently, according to our – you
got it – personalities, and knowing your
money personality can help determine how
much risk tolerance you have and what
types of investments attract you. Quite a
number of investment experts recognize the
importance that personality plays in the
investment game and have categorized
them along some common lines. We
studied all the money personality types we
could find and bring you a summarized
Naija version-
1. The Nervous Spender: This personality
type is very conservative. You’re a
creature of habit, and buy the same
brands from the same place(s). You
rarely deviate from routine and always
plan ahead for the future. Though this
may sound like an ideal personality for
investing, you can be an emotional
spender, making panicked decisions in
the face of unanticipated change. You
are cautious and hesitant about making
proactive financial decisions. You
usually like investments that are ‘safe’
and low-risk (hence low-turnover).
1. The Touchy-feely Spender: This
personality type is compulsive and don’t
usually think long-term. You see
yourself as care free or a ‘free spirit’.
You frequently make financial decisions
based on how you feel and are very
good at second-guessing yourself. You
are most likely to chase after
investment fads and thus are often at
the highest financial risk. If you have a
portfolio, it would likely experience high
turnovers as you change stocks very
often, and possibly riskier investments.
1. The Rigid Follower: This personality type
is very strict about following a
disciplined, set way of doing things. You
go over and over all the details and will
only make decisions based on hard
facts. You are not at all emotional
about finances and you rely heavily on
research before spending. The downside
to this is that you’re so focused on your
long-term goals and diligently following
your ‘rules’ that you may not always
trust your gut or instincts and thus miss
out on easy gains that may come your
way.
1. The Immovable Rock: this personality
type has a lot of self-discipline and
patience. While you listen to advice
from other people and ‘experts’, you
also trust your instincts and will usually
do your own research concerning what
you want. You have faith in your ability
to manage your own money and are not
swayed by the ‘in-thing’ of the moment.
You don’t jump on bandwagons.
1. Follow-Follow: the follow-follow is fairly
easy to identify. You like to own or buy
stuff that other people buy. As long as
it seems popular, you’re all in. You own
an iPad, not because it’s useful for you,
but because it seems like a necessary
accessory to own. You don’t bother
doing your own research, as the
popularity of the thing, be it an item, a
service or stocks, means that it has
been well researched by others and
proved valid. Also, you don’t like to be
responsible for making some decisions;
it’s easier to hold others to blame.
NOTE that the above money personalities
are not exhaustive. And it’s entirely
possible that you or someone you know
may be a mixture of these. Now let’s
discuss investment personalities.
An investing personality or profile simply
identifies how much risk your personality
can take, which in turn determines the kind
of stocks you are likely to invest in. As we
said before, the better you know yourself,
the higher the chances that you’ll make
better-informed decisions. Read on for the
various risk profiles and then, take the
following quiz and find out how your
personality plays out in making investment
decisions!
Now, losing money is never a good thing
but some are more hard-wired to withstand
loss better than others. This is why
understanding your risk tolerance level is
critical to making good decisions. The thing
with risk profiles is that you may assume
more than one at different points in your
investment life, or based on your prevailing
investment goal.
1. Extra Cautious - an EC investor wants
returns on his/her investment but also
wants to protect the money. ECs are
easily affected by market variations
because they need quick access to their
money to address a particular goal.
2. Cautious - the C investor has more room
to take on a little risk. Variations in the
market do not bother them as they are
invested for the long, long term.
3. Assertive - an Assertive investor is
focused on growing their investments as
much as possible and will willingly take
on more risk. They are also invested for
the long term so they do not worry
about any variations or deviations in the
market.
4. Aggressive - as the term suggests, an
aggressive investor willingly takes on
big risks to grow their long-term gains,
though such risks are sensibly chosen.
They usually have time on their side
and are prepared to sit on their
portfolios, thus dips, variations or falls
in the market doesn’t bother them, since
they won’t need the money for a long
while.
Why not take the following quiz to
determine your risk profile.